Is-lm-fx model with floating exchange rates

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IS-LM-FX Model with floating exchange rates

Suppose in an economy, there is an exogenous fall in export demand for home goods. Answer the following questions using the IS-LM-FX model.

- Which schedule shifts in the IS-LM model?

- Why? Explain.

- What happens to the equilibrium output after the change?

- What happens to the equilibrium interest rate after the change?

- What happens to the exchange rate after the change?

- Why? Explain.

- What happens to the consumer spending after the change?

- Why? Explain.

- What happens to the investment spending after the change?

- Why? Explain.

- What happens to the trade balance after the change?

- Why? Explain.

Reference no: EM131768643

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